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Tuesday, 1 February 2011

UK Only Leading Economy To Cut Spending

Cameron's spending cuts could trigger another UK recession

By Ben Aulakh

The Coalition’s statement that ‘there is no alternative’ to their draconian spending cuts were thrown into sharp relief at the World Economic Forum in Davos at the weekend.

The United Kingdom was one of the only leading economies with representatives attending the meeting which has used cuts to bring its budget deficit under control.

The world’s most powerful nations, China and the USA have both been injecting money into their respective economies, looking to spend their way out of the recent economic crisis.

Hedge fund owner and leading economist George Soros also warned David Cameron of the risks of the Coalition’s current austerity programme in a speech to the forum on Thursday.

He said, “I think they may be right in embarking on it [the austerity programme] but I think they will probably have the sense that they will have to modify it when the effects are felt.

“I don't think it can possibly be implemented without pushing the economy into a recession.”

The Chinese government recently used around 15 per cent of their national income to introduce a spending package, in an effort to boost their domestic market.

US President Barrack Obama has also introduced a series of tax cuts and public spending packages to bring the country’s deficit under control.

Indian Prime Minister Manmohan Singh recently launched three rounds of economic stimulus in response to the recent banking crisis.

The economies of all three countries are expected to grow at 8.7 per cent, 3.4 per cent and 8.4 per cent respectively in 2011, figures that are in stark contrast to the decline of 0.5 per cent in the UK economy before Christmas.

These figures have increased the calls for the Coalition to back down on its belief in Tina – there is no alternative – to the current austerity programme.

John Lipsky, First Deputy Director at the International Monetary Fund said, “It seems to me anybody would be willing to re-consider and make adjustments if there was a need, and the economic outlook was substantially different from what was anticipated.”

However Mr Cameron launched into a flat out attack on the economies of China and Russia, in a speech he gave to the forum on Thursday.

He said, “If you’re looking to set up a headquarters abroad, are you going to invest where your premises can be taken away from you, where contracts are routinely dishonoured, where there’s the

threat of political upheaval.

“Or are you going to invest where their are property rights, the rule of law and democratic accountability, values that are an integral and irreducible part of our success.”Photograph from www.politicshome.com